By NICK BUNKLEY

Published: January 31, 2007

CORRECTION APPENDED

These are dire times for Detroit's automakers, and even bleaker ones for thousands of largely invisible companies that make steering wheels, transmissions and other components for the vehicles that roll off the assembly lines.

Yet, as much as parts suppliers have struggled to turn a profit -- or in many cases, merely to stay in business -- investors clearly see tremendous opportunities in these companies.

In the last few months, private equity firms have been pouring billions of dollars into destitute suppliers with visions of rebuilding them back into the lucrative enterprises they once were.

Analysts say the troubled suppliers have become attractive investments because they can be bought cheaply, demand for parts is growing as vehicle sales increase globally and low interest rates are making capital widely available for high-risk deals.

''Just because these companies have run out of money doesn't mean there isn't value in their operations,'' said John Casesa, the managing partner and an automotive analyst for Casesa Strategic Advisers in New York. ''The problem is they just ran out of money doing business the old way.''

Most notably, an investor group led by Appaloosa Management and Cerberus Capital Management is offering to invest $3.4 billion in the Delphi Corporation, the nation's biggest parts supplier, to help bring it out of bankruptcy.

Delphi chose the bid over a competing one worth $4.7 billion from Highland Capital. However, resistance from the United Automobile Workers union to Delphi's proposed wage cuts could derail the deal; Bloomberg News reports that Cerberus, which has not commented publicly, is threatening to withdraw its offer.

Meanwhile, another billionaire investor, Carl C. Icahn, recently spent $200 million to take a 13 percent stake in the Lear Corporation, a parts supplier based in Southfield, Mich.

It is Lear's second time dealing with a big-name financier, the first being Wilbur L. Ross, who has made billions by resurrecting companies in steel and coal. He lately has added European suppliers to a portfolio he began building in 2005; he signed the deal to take control of Lear's unprofitable automotive interiors division in 2006.

Mr. Ross said the companies and facilities he had bought were fundamentally sound but became unprofitable only because they did not have the money to adapt as the industry became more competitive globally. And he can spend whatever is necessary to consolidate operations in regions with excess capacity and expand into high-growth markets such as China and Japan.

''We're taking on what is perceived to be a tremendous amount of risk,'' Mr. Ross said, ''but we believe the actual risk is much less because we're doing it without debt.''

Many of the suppliers Mr. Ross has acquired have relied on one Detroit automaker for a large percentage of their revenue. As a result, the companies were devastated as United States sales fell and orders for parts dwindled.

''It isn't that there aren't a lot of cars being sold,'' he said. ''The problem is that if you're only supplying a limited number of companies, and the ones you're supplying happen to be losing market share, then you're in a deep depression.''

Mr. Ross said he was considering buying more parts suppliers. He declined to name potential targets but said he had confidentiality agreements with 10 companies. ''We're looking at everything that's in difficulty,'' he said.

The few successful suppliers operating today scarcely resemble those once at the forefront of the industry. They focus heavily on innovation. Rather than simply churning out the same parts produced by their competitors, they have lengthy rosters of customers and do not depend on just one or two automakers.

''There's nothing but opportunity,'' said Neil De Koker, president of the trade group Original Equipment Suppliers Association. ''But you can't sit in Detroit and wait for it to come to you.''

That is because business has evaporated in Detroit and expanded in the rest of the world. General Motors and Ford Motor are greatly reducing the number of suppliers they use in the United States as they cut production to compensate for lower market share.

Within a few years, analysts expect Ford to buy parts from 700 to 800 suppliers, down from the 2,500 it has worked with in the past. For example, Ford is halving the number of companies supplying it with major components like seats, instrument panels and wiring.

''We have too many. There has to be fewer,'' Ford's senior vice president for global purchasing, Thomas K. Brown, said this month at the Automotive News World Congress in Dearborn, Mich.

G.M. has not indicated how many suppliers it plans to use in the future, but in the last year it ended agreements with about 500 of the 3,700 companies providing parts. Toyota and Honda, by comparison, each use about 600 suppliers in North America.

In turn, the biggest parts companies, known as Tier 1 suppliers, are buying fewer components from small parts makers.

The cutbacks mean many suppliers will lose much, if not all, of their business in Detroit.

''We're in a shakeout right now, make no mistake about it,'' Richard E. Dauch, chairman of American Axle and Manufacturing, said. ''You must have the mindset to do twice as much, twice as fast -- and if you don't, leave.''

Many suppliers have already exited the industry, and more are expected to do so in the months ahead. Mr. Brown, the senior vice president at Ford, said he expected a wave of supplier bankruptcies in February. In the last year, the number of distressed suppliers doing business with Ford increased 44 percent, he said.

Analysts see little on the horizon to help suppliers that do not sharply alter their way of doing business.

''The mood is a little more upbeat, but only because supplier executives have become used to this environment -- rather than it's actually improving,'' said Brian Johnson of Lehman Brothers in New York.

Mr. Dauch, who bought five troubled G.M. plants in 1994 to create American Axle, said that automakers were having little difficulty outside North America.

''Let's stop saying the automotive industry is in trouble -- it's not,'' Mr. Dauch said. ''You have to go where the business is.''

TRW Automotive, which makes safety products such as airbags and stability control systems, has done exactly that. The company, based in suburban Livonia, Mich., now sells more parts in Europe than the United States, a reversal of a few years ago.

Just as suppliers have broadened their customer base as a hedge against sales slowdowns at one or two carmakers, John C. Plant, TRW's chief executive, said, ''We don't want to be overly dependent on any one region.''

Suppliers that failed to diversify quickly enough are the ones now operating in bankruptcy and being sought by investors eager to force such changes. As more suppliers run out of money, private equity firms are lining up for their chance to prove that it is possible to earn a profit even in an overwhelmingly unprofitable industry.

''Even though Detroit is going through a terrible crisis,'' said Mr. Casesa, the analyst, ''thank goodness it is happening when there is plenty of capital available to restructure these companies.''

Photo: The financier Wilbur L. Ross controls the Lear Corporation, which makes parts for vehicle interiors. He said parts makers were too beholden to one or two automakers and suffered when Detroit lost market share. (Photo by Jennifer S. Altman for The New York Times)

Correction: February 1, 2007, Thursday
A picture caption in Business Day yesterday with the Market Place column, about private equity firms investing in suppliers of automotive parts, misstated the involvement of one financier, Wilbur L. Ross, in the Lear Corporation. Although Mr. Ross bought Lear's unprofitable automotive interiors division in 2006, he does not hold any shares in Lear itself and does not control the company.